BoI subsidiary challenged over Madoff scheme funds

By John Mulligan (Irish Independent)–The liquidator of fraudster Bernie Madoff’s feeder funds has launched a legal case in New York against Bank of Ireland Nominees seeking the repayment of at least $3m (€2.2m).

British Virgin Islands-based liquidator Kenneth Krys alleges that Bank of Ireland Nominees received almost $3m from one of the so-called Madoff feeder funds in November 2007. The money was paid by an entity called Sigma, which was established so that private foreign currency investments could be made in Bernard L Madoff Securities (BLMIS), the convicted swindler’s brokerage business.

Sigma in turn acquired shares in another entity called Sentry. At the end of 2008, Sentry’s accounts statements with BLMIS showed in excess of $6bn of assets supposedly held by BLMIS on behalf of Sentry.

“It is now known that these types of feeder funds were essential to the perpetration of Madoff’s Ponzi scheme,” court documents allege.

Sentry would make withdrawals from the BLMIS account to pay share redemptions to investors from time to time. This was done using funds given to Madoff’s operation by other unwitting investors.

“None of the amounts withdrawn by Sentry from its accounts with BLMIS were proceeds of sales or securities or other investments,” the complaint notes.

Mr Krys’s complaint adds that on or about November 20, 2007, the Sigma fund made redemption payments to Bank of Ireland Nominees totalling just under $3m.

He says that the money obtained by the Sigma fund from BLMIS to pay the bank were “proceeds of Madoff’s Ponzi scheme”.

He adds that the funds were actually insolvent at the time the payments were made.

The ultimate beneficiaries of the redemption made through Bank of Ireland Nominees have been “unjustly enriched”, says Mr Krys, as they will “retain a windfall at the expense of other shareholders and creditors of the funds”.

He wants all the money, plus interest, to be paid back to the funds. Bank of Ireland declined to comment.

Bernie Madoff was arrested in December 2008 and charged with operating the biggest Ponzi scheme ever. In 2009 he was handed down a 150-year prison sentence.

The trustee representing those left out of pocket by Madoff reckons that the total amount of cash lost as a result of the 20-year scam was $20bn.